Key implication for policymakers:
GPR Macro → loosen policy 📉
GPR Energy → tradeoff: stabilize inflation 📈 vs output 📉
Want to know more? Full text here: banque-france.fr/system/files...
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🌍 VAR results suggest geopolitical shocks are not all alike (!) Both shocks are contractionary📉, but:
GPR Energy shocks → inflationary 📈
GPR Macro shocks → deflationary 📉
🔍 Sectoral evidence confirms: energy-intensive industries are hit harder 5/6

🔍 Identification strategy combines 📰narrative / statistical selection of key geopolitical events and 🕒high-frequency sign restrictions (Jarociński & Karadi, 2020)➡️This allows disentangling "GPR Energy" shocks (supply-like) from "GPR Macro" shocks (demand-like) 4/6

🛢️ When geopolitical events raise both GPR index and oil prices, the comovement typically reflects an energy market disruption
📉 When geopolitical events that raise GPR and lower oil prices, the comovement typically reflects a contraction in demand
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Paper starts from new stylised fact🔍 When GPR index by Caldara & Iacoviello (in blue) spikes, sometimes WTI rises📈 (e.g. Russia-Ukraine), while sometimes it drops📉 (e.g. 9/11). Why is that? 2/6